A large increase in the income level in Mexico along with no growth in the U.S. income level is normally expected to cause (assuming no change in interest rates or other factors) a(n) ____ in Mexican demand for U.S. goods, and the Mexican peso should ____.
A) increase; appreciate
B) increase; depreciate
C) decrease; depreciate
D) decrease; appreciate

Question

Quizplus · Accepted Answer

A large increase in income in Mexico would likely lead to an increase in demand for U.S. goods, as people have more money to spend. This increased demand for U.S. goods would lead to a higher demand for U.S. dollars, causing the Mexican peso to depreciate relative to the U.S. dollar.

A Large Increase in the Income Level in Mexico Along